123.As discussed above, section 16(2) provides that a contractual term which puts the non-consumer insured in a worse position than it would be in under the terms of the Act is of no effect unless the requirements of section 17 are satisfied. Such a term is referred to in section 17(1) as a “disadvantageous term”.
124.The section 17 conditions (the “transparency requirements”) are set out in sections 17(2) and 17(3).
125.The requirement, in section 17(2), that the insurer take sufficient steps to draw the term to the insured’s attention is intended to ensure that the insured is given a reasonable opportunity to know that the disadvantageous term exists before it enters into the contract.
126.Under the general law of agency, this requirement could also be satisfied by taking sufficient steps to draw the term to the attention of the insured’s agent. Section 22(4) is also relevant here. That section explicitly states that references to something being done by or in relation to the insurer or the insured include its being done by or in relation to that person’s agent.
127.If the insured (or its agent) has actual knowledge of the disadvantageous term, section 17(5) makes clear that an insured may not claim that the insurer has failed to draw the term sufficiently to its attention.
128.Under section 17(3), the term must also be clear and unambiguous as to its effect. This is intended to require the effects of the disadvantageous term to be set out explicitly, not merely that the language is clear and unambiguous.
129.Section 17(4) provides that that in determining whether the transparency requirements have been met, the characteristics of insured persons of the kind in question should be taken into account, as should the circumstances of the transaction. What is sufficient for one type of insured may not be sufficient for another.
130.The extent to which the term is required to spell out the consequences will depend on the nature of the insured party and the extent to which it could be expected to understand the consequences of the provision.
